South Cities Dominate Office Leasing, 66% Share in FY21 vs 47% in FY18

Robust growth of IT/ITeS sector, affordable rentals & start-up boom have worked in favour of Southern office markets

  • Of 21.32 mn sq. ft. net absorption in FY21 across the top 7 cities, Bengaluru, Chennai & Hyderabad accounted for a 66% share, followed by West (MMR & Pune) with 21% & North (NCR) with 11%
  • Back in FY18, South cities comprised a 47% share, West – 33%, North – 17%
  • Office supply – of 40.25 mn sq. ft. of new office space completion in FY21, South cities dominated with a 63% share; West – 19%, North – 18%
  • Southern office rentals saw double-digit growth (11-15%) in this period; other regions lagged behind

Mumbai, 13 September 2021: The main South India office markets have overtaken other regions in terms of new supply, net absorption, and even rental growth. Among the top 7 cities, Bengaluru, Hyderabad, and Chennai saw their share of total office leasing increase to 66% in FY21 (against 47% in FY18).

The net office absorption in FY21 in the top cities was 21.32 mn sq. ft., and these three southern cities absorbed approx. 14.06 mn sq. ft. MMR and Pune absorbed 4.56 mn sq.ft (21%) and NCR 2.3 mn sq.ft (a mere 11% share.)

In FY18, 31.15 mn sq. ft. of office space was leased in the top 7 cities. Of this net absorption, the Southern cities collectively accounted for 47%, the Western region 33%, and the Northern region 17%.

City FY20-21 FY19-20 FY 18-19 FY 17-18
Net Absorption in top 7 cities (mn. sq. ft.) 21.32 43 35.8 31.15
South Cities Share 66% 55% 57% 47%
West Cities Share 21% 22% 25% 33%
North (NCR) Share 11% 20% 15% 17%

Source: ANAROCK Research

In terms of new office supply too, the Southern cities continued to ramp up their share – from 40% in FY18 to nearly 63% in FY21. Of the total new office space completion of 40.25 mn sq. ft. in FY21 across the top 7 cities, the Southern cities had a 63% share (approx. 25.55 mn sq. ft.). The office supply share of the main Western markets shrank to just 19% in FY21 (from 40% in FY18.)

Anuj Puri, Chairman – ANAROCK Group says, “The remarkable growth in the office market of these three Southern cities when viewed against their Western and Northern counterparts is directly attributable to robust demand by the IT/ITeS sector, affordable rentals, and the exponential growth of start-ups locally over the past few years. The manufacturing and industrial sectors are also driving demand here.”

City FY20-21 FY19-20 FY 18-19 FY 17-18
New Completion in top 7 cities (mn. sq. ft.) 40.25 43.68 43.45 32.53
Share of South Cities 63% 59% 58% 40%
Share of West Cities 19% 16% 14% 40%
Share of North (NCR) 18% 24% 19% 17%

Source: ANAROCK Research

Rental Growth

Notably, between FY18 and FY21, office rentals in each of the southern cities have also shown double-digit growth. In this period, office rentals in NCR remained more or less stagnant while MMR and Pune saw a mere 2% and 8% rental growth respectively.

Avg. Office Rentals INR/sq.ft./month)
City FY20-21 FY19-20 FY 18-19 FY 17-18
Bangalore 77 74 70 67
Chennai 60 60 56 54
Hyderabad 57 56 53 51
MMR 125 125 123 123
Pune 68 68 66 63
NCR 78 78 77 78

Source: ANAROCK Research

  • In Bengaluru, average monthly office rentals were INR 67 per sq. ft. in FY18 – they increased to INR 77 per sq. ft. in FY21 (up 15%)
  • In Chennai, average monthly rentals stood at INR 54 per sq. ft. in FY18 – they rose to INR 60 per sq. ft. in FY21 (up 11%)
  • In Hyderabad, average monthly office rentals rose from INR 51 per sq. ft. in FY18 to nearly INR 57 per sq. ft. in FY21 (up 12%)
  • In MMR, average monthly rentals increased from INR 123 per sq. ft. in FY18 to INR 125 per sq. ft. in FY21 (up by just 2%)
  • Pune saw average rentals rise from INR 63 per sq. ft. in FY18 to INR 68 per sq. ft. in in FY21 (up 8%)
  • In NCR, average office rentals remained unchanged in both years at INR 78 per sq. ft

Major Office Transactions in FY20-21
City Building Name Tenant Micro Market Approx. Area(In Mn Sqft)
Chennai Embassy Block 3 BNY Mellon Old Pallavaram 0.63
Chennai Brigade WTC Mckinsey OMR 0.13
Bengaluru Prestige Startech Ola Technologies Koramangala 0.43
Bengaluru Prestige Minsk Square Apple Vasanth Nagar 0.4
Bengaluru Gold Hill Excelsior Park Siemens Technology Electronic City 0.73
Bengaluru Bagmane RIO Amazon India ORR 0.9
Bengaluru RMZ Ecospace Intel ORR 0.45
Bengaluru Prestige Tech Park Byjus ORR 0.3
Mumbai Oberoi Commerz III Morgan Stanley Goregaon 1.1
Mumbai Godrej Two Amazon India Vikhroli 0.26
Mumbai Equinox Business Park Tata Communications LBS Marg 0.26
Mumbai Liberty Tower Sutherland Global Navi Mumbai 0.13
Noida Advant Navis E&Y Noida Expway 0.15
Noida Berger Towers Thales Sector 16B 0.15
Gurgaon DLF Downtown Syneos Health Sector 24 0.21
Gurgaon Candor Tech Space NTT Sector 21 0.1
Hyderabad Divyashree Orion Wells Fargo Gachibowli 1.3
Hyderabad Salarpuria Sattva Knowledge Capital Google Gachibowli 1
Pune Sky One Corporate Park Simpliwork New Airport Road 0.23
Pune Gera Commerzone DWF Mindcrest Kharadi 0.28

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